Accumulate Navneet; target of Rs 68: Sushil Finance

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Accumulate Navneet; target of Rs 68: Sushil Finance

Sushil Finance is bullish on Navneet Publications India and has recommended accumulate rating on the stock with a target of Rs 68 in its April 11, 2011 research report.

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Sushil Finance is bullish on Navneet Publications India and has recommended accumulate rating on the stock with a target of Rs 68 in its April 11, 2011 research report.

"Navneet Publications India was founded by the Gala family in 1959. The company is into business of publishing Supplementary Books and Paper & Non-paper stationery for schools & offices. The Company currently enjoys 60% market share in Gujarat & Maharashtra under Publishing Segment (Schools). The company's products are sold under the 'Navneet', 'Vikas', 'Gala', 'FfUuNn', 'Boss' and 'Navneet Nxt' brand names."

"Navneet has a strong demand pull from students and a wide distribution reach with 75,000 retail outlets for its various products, 1,50,000 schools for direct marketing covering almost 20 mn students. It plans to further leverage its strong distribution network to market its Stationery products. It also exports its stationery products worldwide to retail majors like Walmart, Tesco & Target. The company has taken various steps in the last 3-4 quarters to rationalize its distribution network & reduce costs, the impact of which is already visible by way of improved margins in the past few quarters. Going ahead we expect a strong double digit growth in stationery segment along with improved margins. Navneet forayed into e-learning two years ago through its subsidiary eSense. This venture has presence currently in Maharashtra & Gujarat. As on date the classroom training module has been installed in 375 schools and the company is confident of reaching 1000 schools by FY12. Once established, the potential to grow Revenues & Margins are immense in this segment & can easily grow bigger than its Publishing business over the coming few years."

"Education is one of the important drivers for economic growth in India. We believe the government is playing its role for strengthening education infrastructure by increasing its budgetary allocation significantly. With approximately 58% of the population under the age of 30%, the education sector seems ripe for growth. Navneet is a market leader in the supplementary books segment in Maharashtra & Gujarat with almost 60% market share. Its foray into e-learning is a new initiative which will aid both topline and bottomline. During 9MFY11, Navneet's standalone Revenues stood at Rs 4540 million registering a growth of 7.5%, its EBIDTA grew by 15.3% to Rs 1116 million & its EBIDTA margins grew by 170 bps to 24.6%. Its APAT grew by 16.3% to Rs 702 million and it registered EPS of Rs 2.9 for 9MFY11. Considering the significant growth potential in the stationery segment, expected syllabus changes in Gujarat and Maharashtra in coming years and new avenues that the company plans to venture into, we believe that going ahead the Company's strong brand, wide distribution network, value addition and cost efficiency will lead to strong growth in revenues and APAT. We initiate our coverage on the Company with a "Accumulate" rating and a target price of Rs 68 (17x FY12E EPS of Rs 4)," says Sushil Finance research report.

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To read the full report click on the attachment